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Facts
The Assessing Officer (AO) made additions under Section 69A of the Income Tax Act, 1961, for loans and disallowance of interest. The assessee contested this before the CIT(A), who granted relief, finding that transactions were through banking channels and Section 69A was wrongly invoked. The Revenue is aggrieved by the CIT(A)'s order.
Held
The Tribunal found a significant lacuna in the fact-finding by both the AO and CIT(A) regarding the trail and flow of money. The creditworthiness of loan givers and genuineness of transactions were not examined in depth. Therefore, the matter was remanded back to the CIT(A) for fresh examination.
Key Issues
Whether the CIT(A) erred in deleting additions made under Section 69A and 69C by the AO without proper examination of the genuineness of transactions and creditworthiness of loan givers, and whether the invocation of Section 69A was legally correct.
Sections Cited
69A, 69C, 250, 292B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE & SHRISANJAY AWASTHI
सुनवाईक�तारीख/ Date of hearing: 10.12.2025 10.12.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
These two appeals comprise of a Revenue’s appeal [ITA No.5022/Del/2025] and a CO filed by the assessee in support of the Ld.CIT(A)’s order [CO 170/Del/2025]. These appeals arise from order dated 23.09.2024 passed u/s 250 of the Income Tax Act, 1961 (hereinafter “the Act”) by Ld. CIT(A), NFAC, Delhi. In this case the Ld. AO has made two additions as under:
(i) Addition u/s 69A of the Act of Rs.1,00,00,000/-, comprising of loan taken from one M/s Odisha Finlease Pvt. Ltd. (Rs.75,00,000) and also from one M/s Pawan Motor & General Finance Ltd. (Rs.25,00,000); and (ii) Interest paid to the loan giving entities (Rs.5,19,123 and Rs.59,726) having been disallowed.
1.1 Aggrieved with this, the assessee approached the Ld.CIT(A) where he could succeed in getting relief mainly on the ground that apparently the impugned transactions were made through banking channels, with other related documentation being also made available at the assessment stage. Also, the Ld. CIT(A) has dealt with at length the issue that section 69A of the Act has been wrongly invoked by the Ld. AO and in any case the Ld. AO has allegedly used third party information to pass an adverse order against the assessee. The Ld. CIT(A) has also deleted the addition on account of interest paid on such loans.
1.2 The Revenue is aggrieved with this action and has approached the ITAT with the following grounds of appeals:
“I. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,00,00,000/- U/s 69A of the Income Tax Act, 1961 merely on the ground that the transactions were made through banking channels ignoring the fact that during the post search proceedings and subsequent field enquiries the entities from whom unsecured- loan were received were not found to be existing. II. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in without appreciating the fact that Sh. Aditya Jain in his statement recorded during search and clearly admitted that the both alleged entities were amongst the several entities managed and controlled by Sh. Mohit Khandelwal and his brother Kapil Khandelwal and their associates and these entities are merely used for providing accommodation entries. III. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,78,849/- made by AO u/s 69C without considering the fact that the interest payments were made to bogus entities. IV. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO u/s 69A & 69C considering the fact that PAN Cards, ITR, audit report, bank statement of the alleged creditors were submitted by the assessee during .assessment proceedings whereas many Judicial authorities have held that mere furnishing of PAN, Bank statement and financials without performing and actual business activity are not sufficient to prove the identity, creditworthiness and genuineness of transactions. V. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in stating that none of the conditions mentioned by in the provision i.e. sec 69A of the Income Tax Act, 1961 satisfied, ignoring the provision of section 292B of the Income Tax Act and not correcting the mistake. VI. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amendany of the ground(s) of appeal.” 1.3 The assessee has filed a Cross Objection in support of the Ld.
CIT(A)’s order.
Before us, the Ld. DR pointed out that the assessee had not been able to establish the genuineness of the impugned transaction and the two loan givers are allegedly, indulging in providing accommodation entries and had come to the adverse notice of the Income Tax Department. The Ld. DR read from pages 1, 2 & 10 of the Ld. AO’s order to demonstrate the failure of the assessee in proving the impugned transactions. On a query from the Bench regarding the investigation of the money- trail with respect to the impugned transactions, it was averred by the Ld. DR that the Ld. AO has relied on the report of Investigation wing and has not probed the issue from this angle.
2.1 The Ld. AR, relied on the findings given in the impugned order and stated that the section 69A of the Act was not legally applicable and that the assessee had provided considerable documents to establish the genuineness of the impugned transactions. Again, a query was put forth from the Bench, regarding the money-trail to show that the sums advanced by the loan givers were actually theirs or that the creditworthiness could be proved conclusively. The Ld. AR stated that only PAN, and related documents were provided by the assessee.
We have carefully considered the rival submissions and have gone through the documents before us, including the paper book filed by the Ld. AR. It is seen that there is a significant lacuna in the fact finding done at the levels of both the Ld. AO and Ld. CIT(A), in as much as the trail or flow of money has not been examined by either of the authorities below. Thus, the creditworthiness of the loan givers and the genuineness of the impugned transactions deserve to be examined in-depth so that a decision on facts is possible. Accordingly, we set aside the impugned order and remand this matter back to the file of the Ld.CIT(A) for examining this issue in depth. The Ld. CIT(A) would examine the documents and evidences supplied by the assessee and if required, call for a report from the Ld. AO.
The CO of the assessee fails with this finding.
In the result, the appeal of Revenue is allowed for statistical purposes and the CO is dismissed.
Order pronounced in the open court on 10.12.2025